Iceland’s super-rich were once heroes – entrepreneurs who gave the small country a sense of pride as they embarked on raiding missions buying up businesses in the UK and across continental Europe.

But the collapse of Iceland’s banking system and currency has rocked the small country. Thousands of Icelanders have lost their life savings, unemployment has hit 9pc and interest rates have risen as high as 18pc. Demonstrations have toppled the government and central bank chief.

Six months after the country’s three largest banks – Glitnir, Landsbanki and Kaupthing – were seized by the government, the entire Icelandic financial community is now under official scrutiny and its former heroes are facing tough questions.

Many of them are now the target of popular outrage. Jon Asgeir Johannesson, the boss of Baugur, has even been subject of a satirical video on YouTube, set to the theme tune of the film The Godfather.

Mr Johannesson is now rarely seen in his former homeland. Nevertheless last month he claimed: “I’ll be back.” The next day, several cartoons on Iceland’s internet news websites warned the public to take cover should Hurricane Jon Asgeir return to the island at three billion krona per second.

Others including Lydur Gudmundsson and Agust Gudmundsson, the brothers behind Kaupthing and, Bjorgolfur Thor Bjorgolfsson and Bjorgolfur Gudmundsson, the father-and-son team who owned Landsbanki, have all but vanished from the streets of Reykjavik.

An investigation into “suspicions of criminal actions” has been launched, with institutions that attracted billions of pounds in deposits from thousands of UK citizens, businesses, local authorities and charities at its centre.

Amid mounting concern that illegal activity has occurred inside publicly-traded banks Gylfi Magnusson, Iceland’s business minister, has conceded there are similarities with the country’s banking system and failed US energy company Enron.

An economic crime team – with a remit to “investigate suspicions of criminal actions in the period preceding the collapse of the Icelandic banks” – has grown from four to 20 members.

Among the many questions that the investigation is expected to ask are: where exactly did this money go? How did the banks of a country the size of a single London suburb manage to burn through so many billions? And what is being done to recover assets for the creditors of the banks?

Only a few months ago many believed that Iceland was just another victim of the global financial crisis. In the good times the country had benefited from the so-called carry trade, which saw financiers borrow in low interest countries such as Japan and lend in high interest countries like Iceland. But the credit crisis put an end to that. The hot money took flight.

But many in Iceland no longer believe that the country is not just a victim of the credit crisis and international flight of capital. Questions are being asked about the country’s banking system that is known for its secrecy, cross-ownership and complexity.

One of many shocking facts is that almost half of all the loans made by Icelandic banks were to holdings companies, many of which are connected to those same Icelandic banks.

In a radio interview last month Arnor Sighvatsson, vice-chief executive of the central bank, said: “The creditors of the banks feared that there were too many high loans to firms owned by the owners of the banks.”

Helgi Magnus Gunnarsson, chief of police at the economic crimes squad, who is not involved in the special investigation , explains that the scope of crisis that happened under his watch has come as a shock to him.

“How much of it will end in criminal convictions I cannot say,” he said. He claims the investigation will seek to establish whether any transactions included “market manipulation, insider trading, all kinds of breach of trust with shareholders about whether senior executives took loans or invested money for the people they were serving, buying their own shares without having any contract that allowed them to do so and how they invested the money of our pension funds”.

One of the major areas of concern is the amount of money allegedly lent by the banks to their employees and associates to buy shares in those same banks, simply using those same shares as collateral.

These loans – known as “kúlu-lán” – allowed borrowers to defer paying interest on the loan until the end of the period, when the whole amount plus interest accrued is due.

Several weeks before the banks collapsed, Kaupthing, Iceland’s biggest bank, announced that a Qatari investor had bought 5pc of its shares. A press release stated at the time: “Kaupthing’s position is strong and we believe in the bank’s strategy and management team.”

Only after the bank collapsed several weeks later did it emerge that the Qatari investor “bought” the stake using a loan from Kaupthing itself and a holding company associated with one of its employees. The bank was in effect purchasing its own shares.

Officials have also questioned why loans to Kaupthing employees to buy shares in the bank were allegedly written off days before the collapse.

The state prosecutor has now hired Eva Joly, the Norwegian-French investigator who led Europe’s biggest ever fraud investigations into bribery and corruption at oil group Elf Aquitaine. She is convinced that it will take a minimum of two to three years to build up enough evidence to secure prosecutions.

“Finding proof will start at home in Iceland, but my instinct is that it will spread,” she said. “If there are things relevant to the UK we will get in touch with the Serious Fraud Office. If there are things relevant to Germany we will get in touch with their authorities.”

The investigators will also look at whether money flowed from Iceland to Luxembourg and the British Virgin Islands, especially Tortola.

“In Iceland, there is more than enough for a starting point for the investigation, given all the talk about market manipulation and unusual loans,” said Ms Joly. “If these are proved they are embezzlement and fraud. The priority is tracing any flow of assets from the banks and getting them back.”

It is not just the financial sector that has come under the spotlight. David Oddsson, former central banker and the former prime minister (who was forced out of office as a result of the financial crisis), has claimed that Iceland needs to investigate “unusual and unconventional loans” given by the banks to senior politicians during the boom years.

It has also emerged that the Central Bank had held meetings about the financial stability of the Icelandic banks, with special concern about Landsbanki’s Icesave accounts, nine months before the collapse – but no public warnings were sounded.

Politicians and businessmen who traditionally held a tight grip over the Icelandic media are now losing control. Dozens of blogs have sprung up. One of the most critical is written by the former justice minister Bjorn Bjarnson, who was in government at the time of the collapse.

“I have written a lot about problems in the business sector over the last 14 years, and I can only compare some parts of it to Enron,” he said. “Here companies have been playing a game, using the media and publishing to make themselves look good. We only hope that the foreign media will soon begin to understand what has been going on.”

Just the tip of the iceberg. So got your red thumbs ready. Ii is going through the system world wide. Lets have fun on this next leg down.